Stocks continued recovering some of the ground lost this year, boosted by the Federal Reserve’s Open Market Committee’s decision to purchase up to $300 billion in long-term government debt, and up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year.

  

The iShares Barclays TIPS ETF, an index of Treasury securities that offer inflation protection, has also gone up nearly 4 percent after the FOMC decision was made public, portending the sharply changed market expectation towards inflation. Gold had also jumped.

  

More details on the long-awaited plan to deal with the illiquid assets were revealed this week. The public-private partnership the plan relies on private sector participation to be successful, with the Treasury providing 50 percent of the equity funding on a 6-to-1 leveraged basis and the fund manager having full secretion in making investment decisions. While we remain somewhat skeptical that current business environment is susceptible for private enterprises to become actively involved. Time will tell. The government itself does take on most of the downside risk in the transaction; however, it may end up needing much more money for this than the currently allocated $100 billion.